QUESTION 7 Review the following figure. Suppose the price of gasoline is $1.60 per gallon. . What would happen to the quantity demanded? . What would happen to the quantity supplied? . At $1.60, is the market in equilibrium, a shortage, or a surplus? P ($ per gallon) $2.20 $1.80 $1.40 $1.20 $1.00 50.60 Excess supply or surplus S An above-equilibrium price Equilibrium price A below equilibrium price Excess demand or shortage D 300 400 500 600 700 800 900 Quantity of Gasoline (millions of gallons) rise fall surplus shortage no change a shift in demand a shift in supply

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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QUESTION 7
Review the following figure. Suppose the price of gasoline is $1.60 per gallon.
▪ What would happen to the quantity demanded?
. What would happen to the quantity supplied?
. At $1.60, is the market in equilibrium, a shortage, or a surplus?
P ($ per gallon)
$2.20
$1.80
$1.40
$1.20
$1.00
50.60
Excess supply
or surplus
An above-aquilibrium price
Equilibrium price
A below-equilibrium price
Excess demand D
or shortage
300 400 500 600 700 800 900
Quantity of Gasoline (millions of gallons)
rise
fall
surplus
shortage
no change
a shift in demand
a shift in supply
Transcribed Image Text:QUESTION 7 Review the following figure. Suppose the price of gasoline is $1.60 per gallon. ▪ What would happen to the quantity demanded? . What would happen to the quantity supplied? . At $1.60, is the market in equilibrium, a shortage, or a surplus? P ($ per gallon) $2.20 $1.80 $1.40 $1.20 $1.00 50.60 Excess supply or surplus An above-aquilibrium price Equilibrium price A below-equilibrium price Excess demand D or shortage 300 400 500 600 700 800 900 Quantity of Gasoline (millions of gallons) rise fall surplus shortage no change a shift in demand a shift in supply
Expert Solution
Introduction

Market equilibrium: At the market equilibrium we have demand equals to supply. Or at market equilibrium point the maximum price which the consumers are willing to pay is exactly equals the minimum price at which the sellers are willing to sell.

 

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